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It does answer your question - what you're misundestanding is that "distributing money throughout the economy" is fiscal policy, not monetary policy. That's wh
by ultraluminous 9y ago
It does answer your question - what you're misundestanding is that "distributing money throughout the economy" is fiscal policy, not monetary policy.
That's what the OP meant by "fiscal policy is necessary" and "the government dropped the ball on fiscal policy". The Federal Reserve, as a body, and monetary policy in general by extension, does not posses the tools to enact fiscal policies.
EDIT: oops didn't see OP already clarified.
- meri_dian 9y agoBut monetary policy is also injecting money into the economy. Both fiscal and monetary do this, but differ in two ways: the nature of the money injected and the way the injection is performed. Monetary policy increases the money supply itself through the exchange of money for treasury bonds and relies on banks to distribute this "new" money, while fiscal policy redistributes money that already exists (previously collected through taxes) and gives it to active businesses through government purchases rather than to bond holding institutions.
- jganetsk 9y agoThe interpretation that banks distribute that money is wrong. Banks don't lend out reserves: https://www.kreditopferhilfe.net/docs/S_and_P__Repeat_After_Me_8_14_13.pdf https://www.kreditopferhilfe.net/docs/S_and_P__Repeat_After_...